The NFTs (non-fungible tokens) are not something really new, they were here with us starting the ICO craze in 2017, but somehow, after 2020, they have started a new, upgraded life, and are considered as one of the next big things. They are a breed of unique digital assets — non-fungible, which are different from regular cryptos which are fungible (one can easily be replaced with the others). What is hard to digest for most of us is how these digital assets which range from art and music to in-game assets and luxury fashion, are selling like high-priced diamonds, sometimes in the range of hundreds of thousands, and even millions of dollars.
There are many famous examples around us, like The Nyan Cat meme that was auctioned for $600,000 in February 2021 or Jack Dorsey’s first tweet that was auctioned for $2.5 million, in this case, the owner wanted to resell but only got bids of around $7k showing the high volatility, and potential for non-real hype of this specific asset class.
I would say that this digital asset class — NFTs (non-fungible tokens) is here to stay, but some of them will become really valuable, but others will just be ways to make a quick buck (or a million of dollars) by some “smart”, and non-ethical marketers, and entrepreneurs.
In a nutshell, what are NFTs?
“For example, in the real world if you buy the Mona Lisa…your friend can make a copy of it. But there’s an art expert who can come to verify that it’s the original one…In the digital world, if you have an image and you make a copy of it, no one knows who has the original one. But now that’s possible thanks to blockchain technology [and NFTs]”
Nikil Viswanathan (CEO at Alchemy)
NFTs have the ability to convert a piece of digital art — visual, audio, video into a unique, verifiable digital asset which are easy to be traded on the blockchain. Most of the non-tech people around us … simply don’t get this idea, but the creators who got in early had reaped the benefits from the investors being ready to pay top prices for NFT variants of regular works.
Let’s take the case of a Youtube video that could be downloaded for free using one of the hundreds of apps available online, while the NFT version of it being sold in the same with a 6 of 7 figure sum. The biggest difference between NFTs, and the cryptos like Bitcoin, or Ethereum is simple: while the crypto can be exchanged, and replaced (they are fungible) with other similar currencies of the same value (like fiat money, you exchange a banknote with another one of similar value), NFTs are unique, and not interchangeable, or replaceable, making no two NFTs the same.
NFTs are not like cryptocurrencies such as Bitcoin and Ethereum, which can be exchanged or replaced (fungible) with other similar currencies of the same value (just the way a dollar bill works). On the other hand, NFTs are unique and not interchangeable, thereby making no two NFTs the same.
NFTs are the blockchain equivalent for a lot of things like pictures, songs, videos, avatar skins, virtual real estate, and assets from games. A special category of NFTs arise over the last 12 months, the ones in the play to earn games, a weird, but interesting business model where you can really earn a part-time, or full-time income while playing your favorite game.
NFTs are hence used for purchasing, investing, and trading a wide range of digital products such as virtual cards. Images of objects, avatar skins, virtual real estate, and in-game assets.
Which are the benefits of NFTs?
When the restrictions triggered by Covid 19 started, many artists had lost the income from live shows, which prompted financial survival issues, so the ability to package their work as NFTs, and sell them was a live saver for many of them. NFTs are a billion-dollar market, with a low entry points so that everybody can get a piece of it, and potentially high profits.
There are few things that can’t be sold as NFTs, basically, any physical thing from real life can have an NFT equivalent. There is a trend now about the tokenization of everything around us, nobody knows if this will really happen, or not, but the thing is that you can attach an NFT equivalent to anything you can think of, the only limit is the imagination.
You can also start collections of NFTs which are small variations of the same idea, recorded separately on the blockchain, starting to have their own life, and pricing in the market.
NFTs also include all of the usual benefits of blockchain, including decentralization, disintermediation, registry immutability, traceability, and verifiability of its contents, movements, and transfers. Also, as using an example, when you as an artist sell a painting, you are paid once. But if you are selling the NFT equivalent of that painting, you can, in the NFT setup to add the feature that you will get paid a royalty every time the digital asset is traded on the secondary market. This royalty can reach a high level if that particular NFT is frequently traded, and also if it reaches a high price.
The income from NFTs became life-changing for many, and it can be for you also. If you don’t consider yourself a creator, don’t worry. You can follow the artists you love, and purchase their NFTs ideally when they are minted so to get them at least theoretically at the lowest price so to resell them with a potential profit in the future.
How can anybody purchase NFTs?
Everybody can purchase an NFT today, but you have to choose which marketplace you are using to make the purchase, which type of digital wallet is compatible with the marketplace, and the type of cryptocurrency needed to finalize the purchase. The most popular platforms for NFT acquisition are OpenSea, Mintable, Rarible, and Nifty Gateway.
Besides the funds needed for NFT purchases, you will need a budget for gas fees which depend on the blockchain you are using, and if you are buying crypto with fiat, you will also have transfer, and exchange commissions here.
How to sell NFTs?
If you know how to buy an NFT, you will definitely know how to sell it. The same way NFTs are purchased, they can be traded on the same marketplaces. You decide the sales price, if there will be a fixed price offer or an auction, and list it for sale. Also, you can upload your own digital content to these marketplaces, convert them into NFTs, and sell them. Some of the platforms curate the users which are allowed to upload content and convert them into NFTs, others allow all users to do this (like OpenSea). While doing so, you shall have the freedom to add specifications such as the description of your item and the suggested price.
How to make an NFT?
NFTs can be created by anyone, once you have some digital content you own rights to. All you need is a digital wallet, some funds in crypto, and a marketplace where you can convert your item into an NFT. It is easy as 1–2–3.
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